Rs 5000/- per day or Rs 150,000/- per month?

The most discussed topic under GST is probably the reverse charge mechanism. In particular, Section 9(4) which reads as follows:

(4) The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

In essence, any registered person getting supplies from an unregistered person would need to pay the tax applicable on the good or service on reverse charge.

In order to provide some relief, the Government issued a Notification providing some relief for supplies aggregating below Rs 5000/- per day. The Notification is reproduced below;-

Notification No.8/2017-Central Tax (Rate)

New Delhi, the 28th June, 2017

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts intra-State supplies of goods or services or both received by a registered person from any supplier, who is not registered, from the whole of the central tax leviable thereon under sub-section (4) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017):

Provided that the said exemption shall not be applicable where the aggregate value of such supplies of goods or service or both received by a registered person from any or all the suppliers, who is or are not registered, exceeds five thousand rupees in a day.

This notification shall come into force with effect from the 1st day of July, 2017.

Issues

The Notification provides an exemption for supplies of goods and services from unregistered suppliers aggregating less than Rs 5000/- per day. One of the first questions that arises is whether an entity needs to monitor this every day. In many entities supplies from unregistered vendors may not be made every day. Some supplies could be on a continuous basis (supply of coffee/tea by unregistered vendors). Monitoring this every day could be an extremely cumbersome task. This leads one to the next question- can we aggregate this Rs 5000/- per day and pay tax on reverse charge only if supplies from unregistered dealers exceed Rs 150,000 per month ( 5000*30).

The answer would appear to be Yes considering the spirit of the Notification.

Would it matter if in this aggregation of Rs 150,000/- supplies from one unregistered vendor exceeds Rs 5000/- on one particular day?

In the opinion of the author, it should not matter being an one-off transaction. However, it is advisable for the Notification to be amended by providing some Illustrative Examples as to how this limit is to be calculated.